Is business leaders’ pride putting ‘digital transformation’ at risk?

[Former Member]

Last year, KPMG published research that suggested CEOs consider the next three years to be more important for their business than the last 50. Hyperbolic as that sounds, few would dispute it contains at least a kernel of truth as we march relentlessly into a digital-first economy.

By “more important”, CEOs mean they and their peers will be making decisions over the next few years that will determine the fate of their company. It could be a good fate - preserved or increased market share or a successful new business model - or a not-so-good fate, like near-irrelevance or extinction.

What makes getting these decisions right so important is that, more than ever, they will be few in number but tremendous in impact. Consider enterprise resource planning (ERP) software as an example, something that needs a multi-million-dollar upgrade from its 1980s origins to be compatible with how a digital business is run today. Some would say getting this wrong, or failing to do it, is dicing with death.

There is a theory on why they might still get digital-age ERP wrong, despite the existential threat such a mistake poses. An ERP system has around 50,000 screens. When a consultant demos it, they can only realistically show around 200.

A week later, a business leader can remember perhaps three of the screens they saw. They’re then in a position where they’re making future-defining decisions based on that, which leads to all sorts of problems – paralyzing risk-aversion, a lack of understanding of what the product can do, and so on.

Dealing with analysis paralysis

The most practical way for non-technical business leaders to overcome this ‘analysis paralysis’ is to think about technology in terms of outcomes, rather than getting bogged down in the technology itself. That too, however, is a minefield.

While technologists will deliver non-customized presentations to frustrated and confused CEOs about what the technology is capable of, marketers will instead sell technology as business outcomes in a series of insubstantial, buzzword-laden meetings. Neither are speaking the same language as the CEO.

Part of the challenge is that ERP software, no matter how you spin it, will never be an exciting subject. Technology like Uber is exciting because it’s relatable and immediate – everybody understands the hassle of getting a cab. ERP software is boring and solves inherently boring business problems.

Call an ERP upgrade “digital transformation”, however, and the CEO’s ears will perk up. Link “digital transformation” to the real problems CEOs worry about every day, and you’ll keep them interested. When they’re kept interested, they’ll be much more likely to make the right decision for the business.

While ERP software on its own is yawn-inducing for the typical business leader, there’s no reason digital transformation should be. It is in fact often one of the highest grades of business action CxOs crave, and a buzz for those who get to do it, or so I’ve been told.

SAP researcher Shaun Snapp believes there is danger lurking beneath this excitement and craving to be the leader making digital transformation happen. “The North American mentality is to be relentlessly positive, generally speaking. In decision making this is a weakness, a cognitive error conmen can exploit. If you want to be the leader who “digitally transforms the business”, but don’t come from a technical background, you need to be especially sure about who you’re listening to and what you’re buying. You need to maintain a healthy skepticism and an objectivity about what it is you want to achieve.”

Making informed decisions on digital transformation

In his work as a consultant presenting ERP solutions to business leaders, Shaun invariably finds that a blend of the right experience and complementary personality types in the meeting room is needed for business leaders to ask the right questions and ultimately make informed decisions.

“A lot of executives buying software today are from a sales background. It doesn’t work when they are in a meeting room with a team of IT professionals. But it also doesn’t work when the sales-minded executive is in a room with another team of salespeople who think the same way they do, because the challenging questions won’t be asked. A room full of sales-minded people thinks too homogenously, and can’t make sound decisions without the researchers and tech-minded people to help them figure it out.

“I think of it like a cake that needs certain ingredients. I am the tech-minded research person, but I need the account executive and the MBA director in the room to interpret what I’m saying in a language that will make sense to the CEO. They need me in the room to back up the claims they are making with quantifiable proof and empirical evidence.”

Business leaders practicing healthy skepticism also need to be wary of marketing by software companies that portrays their product as a simple solution that guarantees success, according to Shaun. “People don’t tend to move from software implementation to marketing, so marketers don’t have that experience, which means what they claim doesn’t typically match the reality of the software.”

Staying humble and taking advice

There is a temptation to think that those occupying top leadership positions must have got there because they’re highly competent in all aspects of running a business, and therefore don’t need the advice of people below them when making decisions. Shaun warns that this couldn’t be further from the truth, especially in an age when technology is playing an increasingly central role in business success.

“Executives need all kinds of help. I’ve talked to people who have gone to all kinds of schools, run all kinds of businesses, but they still can’t make informed decisions on buying technology without the right mix of expertise and experience in the room. There is at times an element of ego and pride in this – the CEO wants to believe they can make the right decisions on big software investments on their own."

Shaun also said companies are generally set up to manage operations, rather than conduct thorough research and test claims. A top-level executive might be tempted to fill in the knowledge gaps that come from limited research by making an instinctive, ‘heroic’ decision on a digital investment, so that the focus can quickly go back to quarterly targets and operations.

He ended with some advice for how business leaders can overcome that pride to give digital transformation the best chance of success. “Don’t be afraid to admit you don’t understand something, or that you haven’t got time to educate yourself on it. The pace of technology innovation is so fast that trying to keep up yourself is like being on a treadmill – there is too much information to digest. Have faith in your team, listen to the right mix of people, but don’t wait too long to make a decision.”